Last checked at 8 Mar 2007 11:00
London Finance & Investment Group P.L.C. Directors Registered office D.C. Marshall, Chairman 30 City Road, F.W.A. Lucas, PhD London, EC1Y 2AG J.H. Maxwell, CA, CCMI, FRSA J.M. Robotham, OBE, FCA, MSI 8th March 2007 TO THE MEMBERS
The Directors are pleased to present the unaudited interim results of London Finance & Investment Group P.L.C. ("the Company") for the six months ended 31st December 2006.
Introduction
As an investment company our target is to achieve growth in shareholder value in real terms over the medium to long term. In the short term our results can be influenced by overall stock market performance. We continue to believe that a combination of Strategic Investments and a General Portfolio is the most effective way of achieving our aims. Strategic Investments are significant investments in smaller UK quoted companies where we have expectations of above average growth over the medium to longer term and these are balanced by a General Portfolio which mainly consists of investments in major U.K. and European equities.
At 31st December 2006, we held three Strategic Investments in which we have board representation: our associated company Western Selection P.L.C., Marylebone Warwick Balfour Group Plc and Finsbury Food Group plc. Detailed comments on our Strategic Investments are given below.
Results
Our net assets per share increased 11% to 58p at 31st December 2006 from 52p at 30th June 2006. Our Strategic Investments increased in value by 19% and our General Portfolio increased by 8%. This compares with the rise in the FTSE 100 index of 7% over the half year. At the close of business on 28th February 2007, our net asset value had further increased to 61p.
The Group made a profit before tax for the half year of ‚£1,048,000 compared with a profit of ‚£85,000 for the same period last year. Our profit after tax and minority interest was ‚£750,000 (2005 - ‚£101,000) giving earnings per share of 2.50p (2005 - 0.38p).
The Group realised ‚£2,080,000 in cash and a profit of ‚£1,239,000 on acceptance of a tender offer for one third of its holding in Marylebone Warwick Balfour Group Plc ("MWB"). The profit for the period is after exceptional charges amounting to ‚£160,000 relating to the cost of setting up the Employee Benefit Trusts for the Group and our associate, Western. The balance of the Group's exceptional charge, ‚£42,000, is for the termination of a consultancy agreement.
Strategic Investments
Western Selection P.L.C. ("Western")
During the period the final exercise date of Western's warrants took place and all remaining warrants were exercised and 669,509 shares were issued, raising ‚£ 429,000. The Group acquired 74,721 new shares in Western and now holds 5,287,221, being 41.23% of Western's issued capital. On 2nd March 2007, Western announced a loss after tax and exceptional items of ‚£232,000 for its half year to 31st December 2006 and a loss per share of 1.9p (2005 - 0.1p). Western's net assets at market value were ‚£10,003,000 equivalent to 99.5p per share, an increase of 10.9% from 89.8p at 30th June 2006.
The market value of the Company's investment in Western at 31st December 2006 was ‚£3,542,000 against a book value of ‚£4,595,000. At market value this represents 20% of the net assets of Lonfin. The underlying value of the Company's investment in Western, valuing Western's own investments at market value, was ‚£5,300,000 (30th June 2006 - ‚£5,100,000).
I am the Chairman of Western and Mr. Robotham is a non-executive director. Western has strategic investments in Creston plc, Northbridge Industrial Services PLC and Swallowfield plc. Extracts from Western's announcement on its strategic investments are set out below:
Creston plc Creston is a marketing services group whose strategy is to grow within its sector both by organic growth and through selective acquisition to become a substantial, diversified, international marketing services group. Creston's results for the half-year to 30th September 2006 show a profit after tax under IFRS of ‚£1,017,000 (2005 - ‚£765,000), equivalent to earnings of 2.1p per share (2005 - 2.1p). Western owns 3,000,000 shares in Creston (5.4%) with a market value at 31st December 2006 of ‚£6,030,000 (30th June 2006 - ‚£4,845,000), being 47% of Western's assets. Northbridge Industrial Services PLC Northbridge was formed for the purpose of acquiring companies that hire and sell specialist industrial equipment such as load banks and generators. Northbridge is seeking to acquire specialist niche businesses to give it the potential for expansion into outsourcing providers, capable of supplying a non-cyclical customer base. Northbridge's first acquisition was Crestchic Limited, one of the largest specialist load bank equipment manufacturers in the world; selling and hiring to a national and international customer base. In March 2006, Northbridge placed 6,437,500 shares at ‚£1 and at the same time its shares were admitted to trading on AIM. Western invested ‚£1,500,000 for 1,500,000 shares, representing 20.3% of Northbridge's share capital. The value of the investment at 31st December 2006 was ‚£2,055,000 representing 16% of Western's assets. Swallowfield plc Swallowfield has a long history of developing and producing aerosol, cosmetic and toiletry products stretching back to 1950. As one of Europe's premier large contract manufacturers of such products it offers an unrivalled breadth of product capabilities. Its skill in design, developing and producing gift packs and themed product ranges compliments its production capability. Swallowfield's latest results, for the year to 30th June 2006, showed profit, before exceptional items, of ‚£295,000 (2005 - loss ‚£95,000). The company has undergone a comprehensive restructuring and rationalisation programme, incurring exceptional costs of ‚£563,000. Net debt has been reduced by 15.5% and the company is now looking to extend product capabilities in China and other low cost areas. Western owns 1,000,000 shares in Swallowfield (8.9% of their issued share capital). The market value of the Company's holding in Swallowfield on 31st December 2006 was ‚£653,000 (30th June 2006 - ‚£455,000) representing 5% of the company's assets.
Marylebone Warwick Balfour Group Plc ("MWB")
During the period, the Company accepted MWB's tender offer for 1,000,000 shares, realising proceeds of ‚£2,080,000 and a profit of ‚£1,239,000, and now owns 2,000,000 shares, representing 2.48% of MWB's issued share capital. The market value of the holding at 31st December, 2006 was ‚£4,820,000, compared with a book value of ‚£1,680,000, which represents 27% of the net assets of Lonfin.
MWB is in the process of a realisation program through the controlled sale of assets with the objective of returning cash or cash equivalents to shareholders by the end of December 2008. We expect the repayment to be above the current market price of MWB's shares.
I am a non-executive director of MWB.
Finsbury Food Group plc ("Finsbury Food")
During the period, the Company exercised warrants to acquire 2,800,000 shares in Finsbury Food at a cost of ‚£893,930. At 31st December 2006, it owned 7,800,000 shares and 200,000 warrants in Finsbury Food, representing 29.7% of their share capital and 7.88% of their warrants. The market value of our holding was ‚£7,020,000 on 31st December 2006 compared to a cost of ‚£1,800,000; this represents 39% of the net assets of Lonfin.
Finsbury Food is a supplier of ambient cakes to most of the UK's major supermarket chains and speciality breads to Waitrose including gluten-free and low fat products.
On 30th January 2007, Finsbury Food announced details of a proposed placing of 12,500,000 shares at 85p each to raise approximately ‚£10,000,000 in connection with the proposed acquisition of Lightbody Group Limited for a total maximum consideration of ‚£37,500,000. This acquisition will enhance the group's product range and customer base and it is expected that the enlarged group will become the UK's leading premium cake business.
I am the deputy chairman of Finsbury Food.
General Portfolio
The General Portfolio consists of large capitalisation companies with significant exposure to the resources, pharmaceuticals, foods & beverages and banking sectors. These sectors accounted for 76% of the portfolio by value at 31st December 2006 and 69% at 30th June 2006.
The year ahead
Over the medium to long term we expect superior returns from our Strategic Investments in smaller quoted companies. However we accept that the share prices of these investments could be volatile in the short term. Equity markets have enjoyed a three year growth run and no longer look cheap by historical standards. However we remain cautiously optimistic for the future.
As is our practice, we only declare one dividend a year which was paid in October 2006 for the year ended 30th June 2006. It is our intention, subject to unforeseen circumstances, to maintain our policy of a progressive dividend distribution.
David C. MarshallChairman
Unaudited Consolidated Profit & Loss Account
Half year ended Year ended 31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000 Operating Income Dividends received 155 99 179 Interest and sundry income 18 15 30 Profit on sales of investments 1,337 179 401 ---------- ---------- ---------- 1,510 293 610 Management services income 251 285 587 ---------- ---------- ---------- 1,761 578 1,197 ---------- ---------- ---------- Administrative expenses Investment operations (170) (163) (337) Management services (274) (295) (557) ---------- ---------- ---------- Total administrative expenses (444) (458) (894) ---------- ---------- ---------- Operating profit 1,317 120 303 Share of result of associated undertaking Operating profit 9 68 169 Exceptional costs (202) (40) (40) Interest payable (76) (63) (123) ---------- ---------- ---------- Profit on ordinary activities before 1,048 85 309 taxation Tax on result of ordinary activities (309) (1) (4) ---------- ---------- ---------- Profit on ordinary activities after 739 84 305 taxation Minority interest 11 17 (2) ---------- ---------- ---------- Profit attributable to members of the 750 101 303 holding company ---------- ---------- ---------- Reconciliation of headline earnings Earnings per share 2.5p 0.4p 1.1p Adjustment for exceptional items, net of 0.5p - - tax ---------- ---------- ---------- Headline earnings per share 3.0p 0.4p 1.1p ---------- ---------- ---------- Fully diluted earnings per share 2.5p 0.4p 1.1p Dividend per share Nil Nil 1.05p
Consolidated Statement of Recognised Gains and Losses
Unrealised gains on investments held as :- Fixed assets 2,313 3,079 3,768 Current assets 364 449 427 Deferred taxation on unrealised gains (734) (1,036) (1,188) ---------- ---------- ---------- 1,943 2,492 3,007 Profit attributable to members 750 101 303 Share capital issued 60 954 949
Dividend paid in respect of the previous (315) (262) (262) year
---------- ---------- ---------- Total recognised gains and losses for the 2,438 3,285 3,997 year ---------- ---------- ----------
Unaudited Consolidated Balance Sheet
31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000 Fixed assets Tangible assets 423 436 430 Investments 15,382 12,473 13,247 ---------- ---------- ---------- 15,805 12,909 13,677 ---------- ---------- ---------- Current assets Listed investments 5,382 4,687 4,907 Debtors 177 239 196 Cash, bank balances and deposits 878 93 171 ---------- ---------- ---------- 6,437 5,019 5,274 ---------- ---------- ---------- Total Assets 22,242 17,928 18,951 ---------- ---------- ---------- Capital and Reserves Called up share capital 1,560 1,500 1,500 Share premium account 1,855 1,859 1,854 Reserves 7,186 4,729 5,244 Profit and loss account 7,468 6,831 7,033 ---------- ---------- ---------- Shareholders funds 18,069 14,919 15,631 Creditors falling due within one year 2,023 1,753 1,893 Deferred taxation 2,097 1,212 1,363 Minority equity interest 53 44 64 ---------- ---------- ---------- 22,242 17,928 18,951 ---------- ---------- ----------
Consolidated Cash Flow Statement
Half year ended Year ended 31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000 Cash outflow on operating activities (305) (58) (120) ---------- ---------- ---------- Returns on investments and servicing of finance Dividend received 282 201 281 Interest paid (54) (64) (95) ---------- ---------- ---------- Net cash inflow from returns on investments 228 137 186 and servicing of finance ---------- ---------- ---------- Taxation paid (3) (1) (4) ---------- ---------- ---------- Investing activities Tangible assets purchased - (11) (12) Fixed assets investments purchases (888) (664) (664) Fixed assets investments disposals 2,080 - - ---------- ---------- ----------
Net cash inflow/(outflow) from investment 1,192 (675) (676) activities
---------- ---------- ---------- Equity dividend paid - Company (315) (262) (262) ---------- ---------- ---------- Financing Share capital issued 60 954 949
Net (repayment)/drawdown of loan facility (150) (50) 50
---------- ---------- ----------
Net cash (outflow)/inflow from financing (90) 904 999
---------- ---------- ---------- Increase in cash 707 45 123 ---------- ---------- ----------(a) Reconciliation of operating profit to net cash flow from operatingactivities 31st 30th June December 2006 2006 ‚£000 ‚£000 Operating profit 1,317 303 Exceptional costs (118) (40) Dividends receivable (155) (179) Depreciation charges 7 13 Profit on sale of fixed asset investment (1,239) - Decrease/(increase) in debtors 19 (15) (Decrease)/increase in creditors (25) 13 Decrease in current asset investments (111) (215) ---------- ---------- (305) (120) ---------- ----------
(b) Reconciliation of net cash flow to movement in net debt
At start Cash At end of of period flow Period ‚£000 ‚£000 ‚£000 2006 Cash at bank 171 707 878 Bank loan (1,650) 150 (1,500) ---------- ---------- ---------- (1,479) 857 (622) ---------- ---------- ---------- 2005/ Cash at bank 48 123 171 Bank loan (1,600) (50) (1,650) ---------- ---------- ---------- (1,552) 73 (1,479) ---------- ---------- ----------
Balance Sheet Analysis taking investments at market value
31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000 Principal investments at market value: Marylebone Warwick Balfour Group Plc 4,820 4,455 5,910 Finsbury Food Group plc 7,020 4,760 4,340 Western Selection P.L.C. 3,542 3,258 2,997 ---------- ---------- ---------- 15,382 12,473 13,247
General equity portfolio - (see analysis 5,382 4,687 4,907 attached)
Tangible fixed assets 423 436 430 Cash, bank balances and deposits 878 93 171 Bank loan (1,500) (1,550) (1,650) Other net (liabilities)/assets (346) 36 (47) Deferred taxation (2,097) (1,212) (1,363) Minority interests (53) (43) (64) ---------- ---------- ---------- Net assets 18,069 14,920 15,631 ---------- ---------- ---------- Net Assets per share 57.9p 49.7p 52.1p
Net Assets per share at 28th February 2007 60.7p
Notes:-
1. The results for the half-year are unaudited and have been prepared in accordance with International Financial Reporting Standards which was the basis on which the accounts for the year ended 30th June 2006 were prepared. The financial information in this interim report does not constitute statutory accounts within the meaning of Section 240(5) of the Companies Act 1985. The audited accounts of the Group for the year ended 30th June 2006 have been reported on by the Group's auditors and have been delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 237(2) or 272(3) of the Companies Act 1985. 2. Earnings per share are based on the profit after taxation and minorities, and on the weighted average number of shares in issue during the period - 30,065,017 (December 2005 - 26,785,377and June 2006 - 28,672,672).
Market Value of General Portfolio
31st December 2006 ‚£000 % GlaxoSmithKline 188 3.5 British American Tobacco 171 3.2 Diageo 171 3.2 Beiersdorf 169 3.1 Nestle 163 3.0 Land Securities Group 163 3.0 Anglo American 162 3.0 Imperial Tobacco Group 161 3.0 Schindler-Holdings 160 3.0 ING Groep 156 2.9 Holcim 154 2.9 Carlsberg 152 2.8 Reckitt Benckiser 152 2.8 Standard Chartered 149 2.8 UBS 149 2.8 ABN AMRO 148 2.7 Heineken 146 2.7 Unilever 143 2.7 Credit Suisse Group 143 2.7 Pernod-Ricard 141 2.6 Roche Holdings 137 2.5 Intercontinental Hotels Group 133 2.5 L'Oreal 128 2.4 Henkel 128 2.4 Koninklijke 126 2.3 Associated British Foods 125 2.3 BHP Billiton 121 2.3 HSBC Holding 120 2.2 Johnson Matthey 120 2.2 BASF 119 2.2 Total 118 2.2 Novartis 118 2.2 Cadbury Schweppes 117 2.2 Royal Dutch Shell 116 2.2 BP 114 2.1 Rio Tinto 109 2.0 LVMH Moƒ«t Hennessy - Louis Vuitton 108 2.0 Sanofi-Aventis 99 1.8 Other 85 1.6 ---------- ---------- 5,382 100.0
LONDON FINANCE & INVESTMENT GROUP PLC